Dollar Maintains Gain In Asia, Eyes On ADP Employment

Dollar maintains some post-ISM gains in Asian session today even though there is lack of follow through buying so far. Richmond Fed Lacker, a known hawk, warned that additional quantitative easing would raise inflation while provide little help to growth. Lacker noted that "confidence in the sustainability of the recovery" is growing and he expects growth to strengthen into 2013. And Lacker said the first hike might come in mid-2013, much earlier than the late 2014 pledge from Fed. And that could still happen even if unemployment rate remains well above 7%.

San Francisco Fed Williams noted that the threadholds for further policy actions "would be if we see economic growth slow to the point where we're not seeing further progress in bringing the unemployment rate down." And that is, would inflation slowed to significantly below Fed's 2% target. Meanwhile, Williams expects the US economy to grow at a "moderate" pace of 2.5% this year. That's a somewhat softened tone from his earlier comments in March, which said that Fed need to "keep applying monetary policy stimulus vigorously."

Philadelphia Fed Plosser warned that "with the very accommodative stance of monetary policy that has now been in place for more than three years, we must guard against the medium- and longer-term risks of inflation." Atlanta Fed Lockhart said the operation twist program will likely complete in June and he's confident that "market will be able to absorb that without much incident in rates."

However, Chicago Fed Evans expressed that there are still need for "strong accommodation until US economy would maintain sustainable growth at 4% for some years."

But after all, markets will continue to look into US data to gauge their expectations on Fed policies. The weaker-than-expected Q1 GDP revived some talks on QE3 which somewhat cooled a bit after yesterday's ISM manufacturing data. A key to watch is this week's nonfarm payroll report, preceded by today's ADP employment first. The ADP data is expected to show 175k growth in the private sector job market in April.

Before that, Swiss retail sales, SVME PMI, Germany unemployment, eurozone unemployment and PMI manufacturing final will be released. Though, the main focus in the eurozone would likely be on UK PMI construction. Yesterday's weaker-than-expected UK PMI manufacturing triggered some deep retreat in Sterling against dollar and euro and the pound will be vulnerable to another downside surprise in data.